Labor has abandoned plan for mining tax, says Andrew Leigh
Labor has no plans to revive its controversial mining tax, assistant Treasury spokesman Andrew Leigh said on Friday.
Labor has no plans to revive its controversial mining tax, assistant Treasury spokesman Andrew Leigh said on Friday.
Mr Leigh told a Minerals Council of Australia tax conference in Melbourne that “I have been very clear that Labor isn’t planning a mining tax”.
“We have taken that lesson squarely on the chin,” the former academic economist said.
Fighting with miners over resource taxation from 2010 to 2013 cost the last Labor government its relationship with the minerals industry for very little extra revenue because by the time it had been enacted, minerals prices and mining profits were falling.
The Abbott government abolished the mining tax along with the carbon tax last year.
Mr Leigh defended the mining tax as recently as January this year in an article in The Australian, saying the government had “thrown out significant sources of revenue like the carbon price and the mining tax”.
But on Friday, asked by Minerals Council chief executive Brendan Pearson if the mining tax was “dead, buried and cremated”, Mr Leigh said, “we’re not looking at taking a mining tax to the next election. I’ve heard no conversations internally about a revised mining tax.”
Mr Leigh said Labor wanted a broader and deeper conversation with the industry than it had in the past.
He said it struck him when Labor was fighting over mining taxation from 2010 to 2013 that “we lost the ability to engage on questions like indigenous employment in the minerals sector” and the “mining for development agenda” in poor countries. Indigenous employment in the minerals sector was one area in which “I think Australian minerals companies can be proud”, Mr Leigh said.
Labor was determined to tighten the rules on debt-servicing deductions for multinational groups operating in Australia as part of a broad crackdown on multinational tax avoidance which would also hit the mining industry.
Asked what evidence there was the mining industry was guilty of tax avoidance on the same scale as global digital companies, Mr Leigh said Labor’s package should be seen in context.
“Labor is proposing a package that raises $2 billion over 4 years. My back of the envelope has every dollar fall in the iron ore price costing governments federal and state $1 billion.
“We are talking about a package that raises in four years something of the level that is raised when the iron ore price goes up $2 in a single year.”
As part of this crackdown, Labor proposes to replace current safe harbour and arms’ length tests for debt deductibility, which let companies claim deductions on up to 60 per cent of their Australian debt costs “without needing to show how this debt relates to their real business activity”, with a worldwide gearing ratio test, Mr Leigh said.
“Because the 60 per cent ratio is an arbitrary figure, it is too generous for some businesses and possibly too strict for others. Our proposal aims to ensure there is strong support through the tax system for companies that have a legitimate need for high levels of debt.
“If your multinational group has a worldwide gearing ratio of 70 per cent, then our proposal will see you being able to claim up to 70 per cent debt in Australia”.
Mr Leigh said cuts in the corporate tax rate of 30 per cent had to be “a core part of the long term agenda for Australia” but that the government would be heavily constrained in pursuing corporate tax cuts because of the blow out in the deficit and federal debt.
He agreed with Treasury head of revenue Rob Heferen who told the same conference on Thursday the burden of company tax mainly falls on workers because it reduces the capital available to improve their productivity and wages.
He said the company tax rate was above the average for rich countries and Labor’s Treasury spokesman Chris Bowen “has very clearly said that he would like to see a lower corporate rate in Australia”.
He said the blow-out in deficits meant the government “is going to be heavily constrained in what it in what can do on corporate taxation, but I think this has to be a core part of the long term agenda for Australia”.
